India’s Local Search Engine Justdial Needs to Dial Up Innovation

India is estimated to have about 51 million small and medium businesses, out of which only 32% are online. Local business listing service Justdial (NSE: JUSTDIAL) has long benefited from the unorganized nature of the Indian business world.

Justdial’s Journey

Justdial was founded in Mumbai as a local search service provider in 1996 by CEO VSS Mani. Today, it is the leading local search engine with offices across India in Ahmedabad, Bengaluru, Chandigarh, Chennai, Coimbatore, Delhi, Hyderabad, Jaipur, Kolkata, and Pune.

Justdial’s search service bridges the gap between the users and businesses by helping users find relevant providers of products and services quickly, while helping businesses listed in Justdial’s database to market their offerings. Its search service was initially available to users over telephone and text messages but it started offering web-based services in 2007. Justdial Apps, which are available on Android, iOS, Windows, and Blackberry platforms, offer location-based services for mobile Internet users. Today, web and mobile users account for about 85% of its users.

Justdial has a database of approximately 18.8 million listings and its users have contributed to 73,568,709 reviews and ratings for various listings.

Justdial faces increasing competition from Google, IndiaMART, and Sulekha in business listings, Zomato in the restaurant sector, Practo in the medical care sector, UrbanClap, UrbanPro, and Housejoy in the services sector. Niche offerings like Practo are gaining ground with their ability to transact. Google has recently announced its Areo app targeting restaurant delivery and services.

Google has now upped its focus on SMBs. About 10 million businesses are available on the Google radar through its maps or search results. To cater to the rest of the market, it has partnered with Indian School of Business and FICCI to launch Digital Unlocked, a training program to teach essential digital skills to business owners.

In response to the competition, Justdial launched its Search Plus offering in 2016 to transition from being purely a provider of local search and related information to being an enabler of transactions. It has also launched a service called Omni that small businesses could use to increase their web visibility. However, the execution on its new offerings has been sloppy. Omni has started seeing revenue declines. Although Search Plus was announced in 2014, it took off only in 2016. There are several such offerings that are gathering dust.

Justdial also needs to worry about the increasing penetration of mobile Internet, which has changed user behavior. Rather than calling Justdial, people are starting to prefer using Google to search for the business directly. Further, small businesses are increasingly using the web and social media for business promotion.

Justdial’s Financials

Justdial has raised $85 million in funding from investors including Sequoia Capital, SAIF Partners, Sapphire Ventures, Tiger Global, Norwest Venture Partners, Matrix Partners India, Nalanda Capital, and eBay.

Justdial reported operating revenue of Rs 718.6 crore ($112.5 million) in financial year 2016-17, up 7.6% and net profit of Rs 121.3 crore ($19 million), down 13.3%.

In the first quarter ended June 30 2017, Justdial reported net profit of Rs 38.2 crore ($6 million), down 1.7% and operating revenues Rs 190 crore ($30 million), up 7.8%. The number of total active listings increased 13.3% while ratings and reviews increased 16.8%. It ran 435,980 paid campaigns during the quarter, up 12%. App downloads increased 52% to 15.4 million.

The company’s board has approved a plan to buy back equity shares worth up to Rs 83.9 crore ($13 million) at a price not exceeding Rs 700 per share. Earlier in June 2015, it announced its plans to buy back 25% of the aggregate of its paid-up capital and free reserves at an estimated cost of Rs 170 crore or $26 million.

In May 2013, Justdial went public on the National Stock Exchange (NSE) with a list price of Rs. 590 ($9.2) and market cap of Rs 3700 crore ($577 million). Within four months, its stock price almost doubled and its market cap crossed the $1 billion level. However, its stock has slumped since to less than its listing price.

For fiscal year 2012-2013, just before it went public, Justdial had reported revenue of Rs 362.77 crore ($56.5 million) with a revenue growth rate of 38% and profit of Rs 68.5 crore ($10.6 million). After going public, its revenue growth was 27.1% in 2014, 27.8% in 2015, 17.1% in 2016, and 7.6% in 2017.

Since going public, its revenue growth has plummeted and so has its stock.

Its stock is currently trading around Rs 357 ($5.6) with a market cap of Rs 24.73 billion ($380 million). It hit a 52-week high of Rs 619.85 ($9.7) in March and 52-week low of Rs 318.05 ($4.95) in January.

Justdial might well be profitable now, but in the world of ubiquitous mobile Internet, it needs to up its game to beat increasing competition from all sides including the likes of Google and Facebook.